This Supreme Court judgment clarifies the distinction between genuine homebuyers and speculative investors under the Insolvency and Bankruptcy Code, 2016. It holds that allottees with agreements structured for assured returns or buy-back clauses, without a genuine intent to possess the property, are speculative investors. Such investors are barred from initiating Corporate Insolvency Resolution Process under Section 7 of the IBC, as the Code is not a recovery mechanism for speculative investments.
Facts Of The Case:
This case consolidates four civil appeals concerning the initiation of Corporate Insolvency Resolution Process (CIRP) against real estate developers by individual allottees. The primary appellant, Mansi Brar Fernandes, entered into a Memorandum of Understanding (MoU) with Gayatri Infra Planner Pvt. Ltd. for four flats, which included a buy-back clause exercisable solely at the developer’s discretion. She paid Rs. 35 lakhs, and the MoU stipulated that the developer could either repurchase the units for Rs. 1 crore after 12 months or deliver possession. The cheques for the buy-back amount were dishonoured. Similarly, appellant Sunita Agarwal invested Rs. 25 lakhs in a project by Antriksh Infratech Pvt. Ltd. under an MoU promising 25% annual returns and a compulsory buy-back. The National Company Law Tribunal (NCLT) admitted their Section 7 IBC applications. However, the National Company Law Appellate Tribunal (NCLAT) set aside these admissions, categorizing both appellants as “speculative investors” due to the nature of their agreements, which were aimed at financial returns rather than property possession. The appeals before the Supreme Court challenged this characterization and the applicability of a subsequent amendment requiring a minimum number of allottees to file a joint application.
Procedural History:
The procedural history began when the appellants, Mansi Brar Fernandes and Sunita Agarwal, filed individual applications under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal (NCLT). The NCLT admitted both applications, initiating the Corporate Insolvency Resolution Process (CIRP) against the respective corporate debtors. Aggrieved by this, the corporate debtors appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT allowed the appeals, setting aside the NCLT’s admission orders. The appellate tribunal held that the appellants were “speculative investors” and not genuine homebuyers, thus disqualifying them from initiating CIRP under Section 7. Subsequently, the appellants filed civil appeals before the Supreme Court of India, challenging the NCLAT’s findings on their status and the applicability of a key legislative amendment to their cases.
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Court Observation:
The Supreme Court observed that the distinction between a genuine homebuyer and a speculative investor is central to the application of the IBC to real estate allottees. It affirmed the NCLAT’s finding that the appellants were speculative investors, noting that their Memorandums of Understanding (MoUs) were structured with assured returns and buy-back clauses, indicating a primary intent for financial gain rather than property possession. The Court held that such speculative investors cannot misuse the IBC, which is a collective resolution mechanism, as a recovery tool for individual investments. It further elaborated on key indicators of speculation, including the nature of the contract, assured returns, and the allottee’s conduct. However, the Court also ruled that the legislative amendment requiring a minimum number of allottees was applicable, setting aside the NCLAT’s contrary finding on this point, and emphasized that the act of the court should not prejudice a litigant.
Final Decision & Judgement:
The Supreme Court disposed of the appeals by affirming the NCLAT’s core finding that the appellants, Mansi Brar Fernandes and Sunita Agarwal, were “speculative investors” and not genuine homebuyers. Consequently, the Court upheld the setting aside of their individual Section 7 IBC applications, barring them from initiating the Corporate Insolvency Resolution Process (CIRP) on this basis. However, the Court set aside the NCLAT’s finding on the inapplicability of the Ordinance/Amendment Act, ruling that the threshold requirement for a minimum number of allottees was indeed applicable. The appellants were granted liberty to pursue their remedies, such as claims for the principal amount, before other appropriate fora like RERA or consumer courts, with the exemption from the bar of limitation. The Court also issued comprehensive directions to strengthen the insolvency framework and protect genuine homebuyers.
Case Details:
Case Title: M. Ansi Brar Fernandes vs. Shubha Sharma and Anr. Civil Appeal No: Civil Appeal Nos. 3826 of 2020 Date of Judgement: September 12, 2025 Judges/Justice Name: Justice J.B. Pardiwala and Justice R. Mahadevan
Download The Judgement Here